Uh oh, Microsoft (Not Google or Facebook) about to buy Skype for $7 Billion!

Uh oh — the Wall Street Journal reports that Microsoft is close to a $7 billion-plus deal to buy Skype, with the transaction to be announced as early as tomorrow morning. That’ll certainly cause some whispers at Google I/O, and not least because both Google and Facebook were recently rumored to be in the running for everyone’s favorite VoIP company.  

Popular as Skype is, it’s still a big bet for Ballmer — that huge price tag makes it one of the biggest acquisitions in Microsoft history, and Skype hasn’t exactly been a profit machine in the eight years it’s been around. On the plus side, we can see amazing potential for Skype to link up with Xbox Live and Kinect Video Chat, and we would certainly hope that promised Windows Phone 7 Skype client actually arrives as promised this summer.

We’ll keep an eye on things and let you know if there’s confirmation — stay tuned.

Want to Purchase MySpace? Bidding Starts at $100 Million

News Corp. is expected to begin entertaining bids for MySpace this week, with a minimum asking price of $100 million, according to a Wall Street Journal report.

In addition to about a half dozen private equity firms expected to submit offers, a couple of Internet companies have also expressed interest in the foundering social-networking site, according to the report, which cited people familiar with the matter.

The media giant revealed in January that it was exploring the possibility of selling or spinning off MySpace after months of rumors and its own dissatisfaction with MySpace’s performance.

News Corp. bought MySpace in 2005 for $580 million as part of its purchase of Intermix. But the former social-networking sensation has fallen on hard times lately, losing more and more ground to Facebook until it finally underwent a massive redesign that left it focusing on pop culture media-sharing for young users rather than attempting to be a universally appealing social network.

However, in the face of News Corp.’s public frustration with MySpace, those efforts were not expected to result in a major turnaround capable of saving the site. News Corp. revealed last November that quarterly revenue at MySpace was down $70 million compared with the same period the year before. During the earnings call at the time, Chief Operating Officer Chase Carey called out MySpace’s poor performance and said “current losses are not acceptable or sustainable.”

When re-org pushes good people out; why Marissa Mayer will leave Google

As we’ve written about before, Google and their new CEO Larry Page are undergoing a significant reorganization that places engineers in power of individual departments and leaves much of the “old” management team to now fight for a seat at the table.

A Google spokesman confirmed last week that the company was undergoing a significant change in management structure.The spokesman said the restructuring is aimed at “streamlining” Google management, putting one person in charge of each of Google’s “functional groups.” These groups are generally based around product lines, such as search or the Android platform.

Citing an unnamed source, the Los Angeles Times reported that the management shakeup included several key promotions with each person being autonomous and reporting directly to Larry Page.

Andy Rubin was named senior vice president of mobile
Vic Gundotra, senior vice president of social
Sundar Pichai, senior vice president of Chrome
Alan Eustace, senior vice president of search
Susan Wojcicki, senior vice president of ads
Salar Kamangar, senior vice president of YouTube and video

Where is Marissa Mayer?
One name left off of the list above was the darling of every “women in tech” article of the last 10 years: Marissa Mayer.

Google IS Marissa Mayer. As vice president, search and user experience (and a 10-year veteran of Google), she’s helped make the company the world’s number-one search engine, with revenues of nearly $30 billion last year.  Almost nothing gets out the door without her approval, even non-search innovations like Gmail and Google Earth.

Google’s last CEO Eric Schmidt said in 2009, “She built the team that designs the products that we all use every day.”

Page has made it clear that he wants engineers in control.  This was the perfect storm for Marissa to take on even more responsibility.  She is young, tons of executive experience, and an engineer at heart.  She has said that she stays up all night coding for fun!  And yet, she was left out and essentially demoted last week.

But why just leave? And where will Google’s 19th employee go?
First of all, she’s wealthy. That “19th employee” bit is code, within Silicon Valley, for “rich”; the earlier an employee joins a startup which succeeds, the more money they make. With Google, which is still worth $100 billion after its stock tumble, that translates into hundreds of millions of dollars for Mayer, who owns a penthouse apartment in San Francisco’s Four Seasons, another home in outrageously pricey Palo Alto, and a large art collection.  She once paid $60,000 for a lunch with Oscar de la Renta, and she owns part of I Dream of Cake, a “cake gallery” in North Beach, as a way of indulging her pastry fetish.

So she’s already made her money. And her career? Mayer, who joined Google in 1999 straight out of Stanford’s graduate computer-science department, rose quickly through the ranks. A stint dating Google cofounder Larry Page surely didn’t hurt her chances, but she won promotions first to director and then to vice president mostly by dint of a schedule of robotic overwork and an obsession with keeping the search engine’s homepage sparse and free of clutter. Her looks — blonde, Midwestern, unusually attractive for Silicon Valley — helped her win magazine covers. And she won fans among Google’s tight-knit top management, even as underlings groaned about her scattered, arbitrary management style.

It’s time… for Facebook
In the end, it’s probably a good time to leave.  Recently married, beyond wealthy, and with a feeling of betrayal from the company she helped build.  She will be heavily courted by venture capitalists and could probably raise a round of funding quicker than anyone else in Silicon Valley.

I’d put my money on her reuniting with Sheryl Sandberg at Facebook.  Sandberg left Google and as COO has helped build Facebook into the one company that COULD truly challenge Google for web dominance.  With Mayer on board, there is zero doubt in my mind that they would turn Facebook into the indexed, searchable, backbone of the internet.

Will Mayer jump ship?  Nobody knows for sure but her, but I highly doubt this is the last we hear from her in the next 6 months.

The “Winklevii” lose in court, must accept Facebook deal

A panel of federal judges on Monday ruled that Tyler and Cameron Winklevoss can’t back out of the settlement deal they made in a lawsuit charging that Mark Zuckerberg stole their idea for Facebook.

“The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace,” three Ninth Circuit Court of Appeals judges said in a ruling.  

“At some point, litigation must come to an end,” the judges continued. “That point has now been reached.”

Twin brothers Tyler and Cameron Winklevoss claim they enlisted Zuckerberg to finish software code for their ConnectU social-networking website while they were all students at Harvard in 2003.

Zuckerberg, a second year student at the time, took their code and their idea and launched Facebook in February 2004 instead of holding up his end of the deal, according to the brothers. Facebook rejects that account.

Hollywood made the saga famous in the hit film “The Social Network.”

The twins inked a settlement two years ago that got them $20 million in cash and $45 million worth of stock valued at $36 per share.

The value of that yet-to-be-issued stock has skyrocketed along with Facebook’s estimated market value, which was placed at $50 billion early this year, the judges noted in their ruling.

“With the help of a team of lawyers and a financial advisor, they made a deal that appears quite favorable in light of recent market activity,” the judges said.

“For whatever reason, they now want to back out,” they continued. “Like the district court, we see no basis for allowing them to do so.”

 

Google to its engineers: Prepare to take over!

Google is due for a “significant reorganization” under new CEO Larry Page, John Paczkowski at All Things D reports.

Sources tell Paczkowski Google will be moving away from a structure with centralized managers and towards a structure where engineers run individual units.

This is all part of what we’ve been hearing about Page’s ideas about how Google should operate.

He wants it to be leaner, and more like a startup.

The success of Android, led by Andy Rubin with minimal involvement from Google’s managers, is the model for the rest of the company.

As a result, Google managers might want to be nervous right about now. Sounds like Page is going to render them redundant.

Good news for Google managers that might end up without work? Facebook is desperate for product managers and they seem to have a thing for ex-Googlers.

 

Meet +1: Google creates their own “Like” button

It’s human nature.  We have a tendency to like the things our friends recommend.  We put value in the experience of others, and now so does Google.

The company today is launching a new feature that allows people to “+1” (pronounced “plus one”) a search result.  Google explains the idea:

The +1 button is shorthand for “this is pretty cool” or “you should check this out.”

Click +1 to publicly give something your stamp of approval.  Your +1’s can help friends, contacts, and others on the web find the best stuff when they search.

Sometimes it’s easier to find exactly what you’re looking for when someone you know already found it. Get recommendations for the things that interest you, right when you want them, in your search results.

The next time you’re trying to remember that bed and breakfast your buddy was raving about, or find a great charity to support, a +1 could help you out.

 

Here is what the search result would look like for “bizibly”:

It’s actually really simple and potentially awesome.  When you search for something on Google, when logged into a Google account, you will see how many times an item in the search results has been “+1’d” in your search results.  Additionally, you too will have the ability to “leave your mark on the web” as Google puts it by “+1’ing” something.

Don’t I already use the Facebook “Like” button?

The biggest difference between this and Facebook’s “Like” button?  From what I can see, there is no broadcast feature to “+1.”  As in, Facebook should really call their “Like” button a “Share” button because it does not just log the fact that you like something, it literally broadcasts that fact out to your hundreds (or thousands) of friends.

Think of it this way: If I am not looking for a hotel in upstate New York, why do I care if one of my Facebook friends “Like’s” that hotel? But the moment they click that button, it gets sent to me in my News Feed.  Now with this “+1” idea, I would only see that you recommended that hotel when I actually searched for hotels in upstate New York.  Pretty cool huh?  Google is even touting this project as “Recommendations when you want them.”

 

Can Larry Page and Google continue to ignore social networking?

We saw the publication of two lengthy articles this week about Larry Page (University of Michigan graduate), who is scheduled to take over as Google’s chief executive on April 4. After I read them, one big question lingered: What does his takeover mean for Google’s long-rumored Facebook competitor?

It may not mean anything. Google executives have been hinting at this product for a while now, and there’s presumably a large team working on it. So Page may not be any more (or less) involved as CEO than he is in his current role as the company’s president. But this is an ambitious project, reportedly adding social features to many existing Google products, and it’s going to need the support of the company’s CEO. That’s especially true if the product stumbles out of the gate, as happened with many of Google’s other social initiatives.

Yet social networking doesn’t seem to be on Page’s radar. Writing in Fast Company, Farhad Manjoo notes that Page doesn’t have a profile on Facebook or other social sites, and he quotes former Google executive Jason Shellen (now at AOL) as saying, “There’s an EQ — an emotional intelligence — around social software, and it just might be out of Google’s reach.”

In Wired, meanwhile, Steven Levy portrays Page as someone who follows his intellectual passions, even if they don’t seem to be a great fit for the company. (Apparently Page is behind the company’s recent, baffling effort to build self-driving cars.) Longtime Google executive Marissa Mayer told Levy that the key fact about both Page and Google co-founder Sergey Brin is that they were both educated in Montessori schools, where “you go paint because you have something to express or you just want to do it that afternoon, not because the teacher said so.”

Where does social networking fit into those interests? Well, it’s noticeably absent from the story. Instead, Levy and the Googlers he interviews return again and again to the theme of information. (The self-driving car is defended with the phrase, “This is all information.”) Social products don’t seem to interest Page — Shellen told Manjoo, “With social, there’s nothing for Google to solve.”

And Page comes off as the exact opposite of the oversharing type who thrives on social networks — for example, he got rid of his personal assistant with the explicit goal of making it harder for employees to meet with him. As Levy puts it:

Like the plane spotters who log the peregrinations of aircraft, Googlers often swap data concerning Page’s and Brin’s ambulatory patterns. Even so, it can sometimes be tricky to catch Page; he is a master of the drive-by greeting, flashing a wide, happy-to-see-you smile while slightly picking up his pace, leaving a potential interlocutor talking to his receding back.

Again, none of this says much about Google’s social products. But it does suggest that the company will soon be led by a man who doesn’t want to use them.

 

Google and Metcalf’s Law

Google recently added a caustic warning message when users attempt to export their Google Contacts to Facebook:

Hold on a second. Are you super sure you want to import your contact information for your friends into a service that won’t let you get it out?

Facebook allows users to download their personal information (photos, profile info, etc) but has been fiercely protective of the social graph (you can’t download friends, etc). The downloaded data arrives in a .zip file – hardly a serious attempt to interoperate using modern APIs (update: Facebook employee corrects me/clarifies in comments here). In contrast, Google has taken an aggressively open posture with respect to the social graph, calling Facebook’s policy “data protectionism.” 

The economic logic behind these positions is a straightforward application of Metcalf’s law, which states that the value of a network is the square of the number of nodes in the network*.  A corollary to Metcalf’s law is that when two networks connect or interoperate the smaller network benefits more than the larger network does. If network A has 10 users then according to Metcalf’s law its “value” is 100 (10*10).   If network B has 20 users than it’s value is 400 (20*20). If they interoperate, network A gains 400 in value but network B only gains 100 in value. Interoperating is generally good for end users, but assuming the two networks are directly competitive – one’s gain is the other’s loss – the larger network loses.

A similar network interoperability battle happened last decade among Instant Messaging networks. AIM was the dominant network for many years and refused to interoperate with other networks. Google Chat adopted open standards (Jabber) and MSN and Yahoo were much more open to interoperating. Eventually this battle ended in a whimper — AIM never generated much revenue, and capitulated to aggregators and openness.  (Capitulating was probably a big mistake – they had the opportunity to be as financially successful as Skype or Tencent).

Google might very well genuinely believe in openness. But it is also strategically wise for them to be open in layers that are not strategic (mobile OS, social graph, Google docs) while remaining closed in layers that are strategic (search ranking algorithm, virtually all of their advertising services).

When Google releases their long-awaited new social network, Google Me, expect an emphasis on openness. This could create a rich ecosystem around their social platform that could put pressure on Facebook to interoperate. True interoperability would be great for startups, innovation, and – most importantly – end users.

* Metcalf’s law assumes that every node is connected to every node and each connection is equally valuable. Real world networks are normally not like this. In particular, social networks are much more clustered and therefore have somewhere between linear and exponential utility growth with each additional user.

 

Facebook is no longer a social network

We all know that the delineation between public and private was eroded by Facebook a long time ago. Over. Done. But now Facebook’s sheer scale is pushing it in a new direction, one that encroaches on your authenticity.

Facebook is no longer a social network. They stopped being one long before the movie. Facebook is really a huge broadcast platform. Everything that happens between its walls is one degree away from being public, one massive auditorium filled with everyone you’ve ever met, most of whom you haven’t seen or spoken to in years.

Last week a bunch of massive sites across the web adopted Facebook commenting. The integration of the formatting and fonts is so strong that when you’re reading comments you actually feel like you are on Facebook, not a tech focused vertical site.

This latest push by Facebook to tie people to one identity across the interwebs is very troublesome.

The problem with tying internet-wide identity to a broadcast network like Facebook is that people don’t want one normalized identity, either in real life, or virtually.

People yearn to be individuals. They want to be authentic. They have numerous different groups of real-life friends. They stylize conversations. They are emotional and have an innate need to connect on different levels with different people. This is because humans are born with an instinctual desire to understand the broader context of their surroundings and build rapport, a social awareness often called emotional intelligence.

In the beginning, Facebook catered to this instinct we all have. But FB in its current form, a big graph of people who may or may not know anything about one another, does not.

And forcing people to comment – and more broadly speaking to log-on – with one identity puts a massive stranglehold on our very nature. I’m not too worried about FB Comments in isolation, but the writing is on the wall: all of this off-site encroachment of the Facebook graph portends where FB is really going in pushing one identity. And a uniform identity defies us.

Face it, authenticity goes way down when people know their 700 friends, grandma, and 5 ex-girlfriends are tuning in each time they post something on the web.

Don’t believe me? Go to TechCrunch and count the comments on last week’s posts. Better yet, go read the comments. They suck. They’re sterile and neutered.

The nature of commenting on the web needs to feel organic and fluid, just like it does in real life.  And even anonymous if necessary, though that’s not at the core of my argument.

My main contention is that the off-network spread of Facebook’s identity graph is parasitic for the web. Now – just to join a technology community on the internet (TechCrunch) – we need to live inside Facebook walls.

Unfortunately, it doesn’t surprise me why this is happening. The carrot here for content sites is clear: even with a lower volume of comments, the potential viral effects and CTRs are something parent sites like AOL are surely extrapolating, based on their recent manifesto to boost reach, drive traffic, and maximize page views (though I’d argue they would perform much better on mainstream sites like HuffPo or TMZ than a niche vertical like TC, which your friends are less likely to be aware of).

There’s a pretty straightforward reason why FB is valued at an astonishing $75B, and it’s all about them forming a reciprocal feedback loop between Facebook.com and other sites so that you can be targeted.

But for such a massively social company, Facebook’s insistence that you have one identity across the web is both short-sighted and asinine, and people I talk to are starting to realize this.

Fact is, one social network will not rule the web… People are simply way too social to allow that.

 

It’s All About Timing!

I never had the opportunity to invest in YouTube but I have to admit that if I did I probably would have passed (which of course would have been a huge mistake). I remember the dozens of companies before YouTube that tried to create crowdsourced video sites and failed. Based on “pattern recognition” (a dangerous thing to rely on), I would have been deeply skeptical of the space. 

What I failed to appreciate was that the prior crowdsourced video sites were ahead of their time. YouTube built a great product, but, more importantly, got the market timing just right. By 2005, all the pieces were in place to enable crowdsourced video – the proliferation of home broadband, digital camcorders, a version of Flash where videos “just worked,” copyrighted web content that could be exported to YouTube, and blogs that wanted to embed videos.

Almost anything you build on the web has already been tried in one form or another. This should not deter you. Antecedents existed for Google, Facebook, Groupon, and almost every other tech startup that has succeeded since the dot-com bubble.

Entrepreneurs should always ask themselves “why will I succeed where others failed?” If the answer is simply “I’m doing it right” or “I’m smarter,” you are probably underestimating your antecedents, which were probably run by competent or even great entrepreneurs who did everything possible to succeed. Instead your answer should include an explanation about why the timing is right – about some fundamental changes in the world that enable the idea you are pursuing to finally succeed. If the necessary conditions were in place, say, a year ago, that might still be ok – YouTube happened to nail their product out of the gate, but if they hadn’t a company started later might have succeeded in their place.

Often the necessary conditions are only beginning to emerge and knowing when they will do so sufficiently is very hard to predict. We all know the internet will become fully social, personalized, mobile, location-based, interactive, etc. and lots of new, successful startups will be built as a result. What is very hard to know is when these things will happen at scale.

One way to mitigate timing risk is to manage your cash accordingly. If you are trying to ride existing trends you should ramp up aggressively. If you are betting on emerging trends it is better to keep your burn low and runway long.  This takes discipline and patience but is also the way you hit it really big.